Meta description: Earning money from a side hustle? Learn who has to pay quarterly estimated taxes, how to calculate them, when they are due, and how to avoid IRS penalties.
The first time a side hustler hears the words “quarterly estimated taxes,” it often sounds like a trap. You earned some extra money from driving, freelancing, reselling, or tutoring. Now the IRS wants payments during the year, before you even file a return?
It is less scary than it sounds. Estimated taxes are simply a way of paying your tax bill in installments instead of one big lump sum in April. This guide explains who needs to pay them, how to calculate your payments, the deadlines, and what happens if you get it wrong.
Why Estimated Taxes Exist
The US tax system is “pay as you go.” If you work for an employer, tax is taken out of every paycheck, so the IRS gets its money throughout the year. When you earn side income as an independent contractor, nobody withholds anything. So the IRS expects you to send in payments yourself, roughly every three months.
The IRS describes the rules on its Estimated Taxes page. Here is the plain-English version.
Who Has to Pay Estimated Taxes?
In general, you should make estimated payments if both of these are true:
- You expect to owe at least $1,000 in federal tax for the year after subtracting withholding and credits.
- Your withholding and credits will be less than the smaller of:
- 90% of the tax shown on this year’s return, or
- 100% of the tax shown on last year’s return (the number rises to 110% if your adjusted gross income last year was above $150,000, or $75,000 if married filing separately).
These are the “safe harbor” rules, and they are explained in IRS Publication 505. If your situation is simple, the shortcut is this: if you have a side hustle that earns a meaningful profit and you have no (or too little) withholding to cover the tax on it, you probably need to make estimated payments.
People who commonly need to pay:
- Freelancers and independent contractors (1099-NEC income)
- Gig workers (rideshare, delivery, task apps)
- Online sellers and creators
- Landlords and people with significant investment income
- Anyone with large untaxed income, such as capital gains, interest, or dividends
The Four Deadlines
The tax year is split into four payment periods, but they are not equal quarters. The due dates usually fall on or around:
| Payment period | Income earned | Due date |
|---|---|---|
| Q1 | Jan 1 to Mar 31 | April 15 |
| Q2 | Apr 1 to May 31 | June 15 |
| Q3 | Jun 1 to Aug 31 | September 15 |
| Q4 | Sep 1 to Dec 31 | January 15 of the next year |
When a due date lands on a weekend or holiday, it moves to the next business day. For 2026 income, the fourth payment is due in January 2027. Confirm the exact dates on IRS.gov, since they can shift.
You can skip the January payment if you file your full return and pay the remaining balance by the end of January. That is an option, not a requirement.
What Taxes Are You Actually Paying?
Your estimated payments cover two things.
1. Income Tax
This is the regular federal income tax on your total taxable income, including your side hustle profit. Rates depend on your filing status and income bracket.
2. Self-Employment Tax
When you are self-employed, you pay both the employee and employer halves of Social Security and Medicare. The combined rate is 15.3% of most net self-employment earnings (12.4% Social Security up to an annual wage cap, plus 2.9% Medicare). You calculate it on Schedule SE. Net earnings for this purpose are slightly lower than your profit, because the calculation applies the rate to 92.35% of net profit.
You also get to deduct half of the self-employment tax when calculating your income tax, which softens the blow a bit.
Don’t forget your state. Most states with an income tax also expect estimated payments. Check your state revenue department’s website for its forms and deadlines.
Step-by-Step: How to Calculate Your Payment
Here is a simple method for most side hustlers.
Step 1: Estimate your net profit
Start with your expected side hustle income for the year, then subtract business expenses. This is the figure that goes on Schedule C.
Example: Jordan drives for a delivery app and expects to bring in $18,000 this year, with $4,000 in deductible costs (mileage, phone, fees). Net profit: $14,000.
Step 2: Calculate self-employment tax
Multiply net profit by 92.35%, then by 15.3%.
$14,000 x 0.9235 = $12,929 $12,929 x 0.153 = about $1,978
Step 3: Estimate income tax
Add your side hustle profit to other income (like a day job), subtract half of the self-employment tax and your standard or itemized deduction, and apply the tax brackets. You may also qualify for the qualified business income deduction, which can reduce taxable income for some self-employed people.
The worksheet in Form 1040-ES walks you through this step by step.
Step 4: Subtract withholding and credits
If you also have a job with tax withheld, subtract what you expect to be withheld during the year. Subtract any credits you expect to claim.
Step 5: Divide by four
Take the total you expect to owe and divide it into four equal payments, or use the safe-harbor amount. If your income is uneven, you may pay different amounts each quarter based on what you actually earned, but equal payments are simpler.
A Quick Shortcut
If the math feels heavy, many side hustlers set aside 25% to 30% of net profit as they earn it, then send that money to the IRS each quarter. Adjust the percentage once you have run the real numbers, since your bracket and state matter.
The Easy Way If You Have a Day Job: Adjust Your Withholding
Here is a trick many people miss. If you have a regular job, you can sometimes cover your side hustle taxes by increasing the withholding on your paycheck instead of making quarterly payments.
The IRS Tax Withholding Estimator helps you figure out what to put on a new Form W-4. Withholding is treated as if it were paid evenly throughout the year, even if you adjust it late, which makes it a forgiving option. The tradeoff is that it will not cover self-employment tax on its own in an obvious way, so check the estimator’s output carefully.
How to Pay
You have several ways to send estimated payments:
- IRS Direct Pay: Free, direct from your bank account. No registration needed.
- IRS Online Account: Lets you see your payment history and make payments.
- EFTPS: The Electronic Federal Tax Payment System. It lets you schedule payments in advance, which is helpful if you want to automate.
- Debit or credit card: Through an IRS-approved processor. Fees apply.
- By mail: Using the payment vouchers in Form 1040-ES.
When paying, choose “estimated tax” and the correct tax year. Keep the confirmation number for every payment.
What Happens If You Underpay or Pay Late?
The IRS charges an underpayment penalty, which is essentially interest on the amount you should have paid by each deadline. It is calculated on Form 2210. The penalty is not a flat fee: it depends on how much you underpaid and for how long.
You can generally avoid the penalty if you:
- Owe less than $1,000 after withholding and credits, or
- Paid at least 90% of this year’s tax, or
- Paid at least 100% of last year’s tax (110% for higher earners)
The prior-year rule is useful when your income is growing and you cannot predict this year’s profit. Simply pay at least what you owed last year, divided into four installments, and you are generally protected from the penalty, even if you end up owing more in April. You still have to pay the difference when you file.
Common Mistakes to Avoid
- Waiting until April. One big payment may leave you short and add penalties.
- Forgetting self-employment tax. Many beginners only calculate income tax.
- Not tracking expenses. Without records, your profit looks higher and your tax estimate rises.
- Using the wrong tax year or identity when paying. Payments can end up misapplied. Double-check details.
- Ignoring state taxes. A federal payment does not cover state taxes.
- Skipping a payment because you had a slow quarter. If you expect to owe, adjust the amount but do not ignore the deadline.
- Mixing personal and business money. Keep a separate account to make tracking easier.
A Simple System That Works
Here is a routine that keeps estimated taxes manageable:
- Open a separate savings account just for taxes.
- Transfer a set percentage of every payment you receive, the same day it arrives.
- Put the four due dates in your calendar with reminders a week earlier.
- Recalculate each quarter using your actual profit so far.
- Pay through Direct Pay or EFTPS and save your confirmations.
If you are also working on your budget, our guide to irregular income budgeting shows how to build this habit into a larger system.
Tools That Can Help
- The IRS Form 1040-ES worksheet for calculating payments
- Tax software such as TurboTax, H&R Block, or FreeTaxUSA, many of which include estimated tax calculators
- Bookkeeping tools like QuickBooks to track profit as you go
- A CPA or enrolled agent if your income is high, you have several income sources, or you live in more than one state. You can find credentialed preparers through the IRS directory.
Frequently Asked Questions
Do I have to pay estimated taxes if my side hustle is small? If you expect to owe less than $1,000 in tax for the year after withholding and credits, you generally do not need to make estimated payments. Add up income tax and self-employment tax to see where you stand.
What if I miss a quarterly deadline? Pay as soon as you can. The penalty is based on how much was underpaid and how long it stayed unpaid, so a late payment costs less than no payment.
Can I pay more in one quarter and less in another? Yes. The payments do not have to be equal, but penalties are calculated by period, so paying on time each quarter is safest.
Do I pay estimated taxes on money I haven’t received yet? No. Estimated taxes are based on income you actually earn or receive during the period.
What if I overpay? You will get a refund or can apply the overpayment to next year’s estimated taxes when you file your return.
Do estimated tax rules apply to hobby income? Hobby income is generally still reportable, though it is taxed differently from business income. Ask a tax professional if you are unsure which category you fall under.
Final Thoughts
Quarterly estimated taxes feel intimidating mostly because they are unfamiliar. Once you have estimated your profit, picked a percentage to save, and put the four dates on your calendar, the process takes about fifteen minutes per quarter. The reward is no giant bill in April and no penalty letters in the mail. Start with a rough estimate, refine it as the year goes on, and keep the IRS confirmation numbers for every payment.
Disclaimer: This article is for general informational purposes only and is not tax, legal, or financial advice. Tax laws, thresholds, and deadlines change, and individual situations vary. Consult a qualified tax professional or the IRS before making decisions.